Is it another instance of market manipulation or a bear game gone terribly wrong? Akruti City Ltd, a real estate developer promoted by Hemant Shah, continued to surge and shot up by another 10.7% to Rs 2,227.50, taking its gain for the week to 107%. With this, shares of the realty company?which was downgraded by rating firm Crisil on Thursday?gained a whopping 305% since January 15 this year, making it the second largest realty company in terms of market capitalisation after DLF, but ahead of Unitech.

The sharp rise in Akruti at a time when other realty companies are facing intense heat on the stock market has surprised marketmen. ?This is a bear game that has gone terribly wrong. There was a clutch of operators who went short on the stock anticipating the price to fall, but when it did not happen they were trapped in the futures segment and went to buy shares from the open market. Since the company is very tightly held and has very few shares floating in the market, the operators had to buy them at a very high premium,? said a market source.

It is learnt that an operator who owns around 3% equity in the company is rumoured to have been involved in the game that panned out in the last ten days. ?There are five other brokers from Mumbai and Kolkata who are being interrogated by Sebi for their involvement in the Akruti mess. It is expected that these operators, who had got into short selling at Rs 50 crore, lost around Rs 200 crore,? said a broker on condition of anonymity.

When contacted, Sebi officials were not available for comment. Sources said Sebi and the stock exchanges have initiated a probe into the share spurt.

As the promoter holding in the company is at a high 89.96%, the floating stock in the market is very low. Individual investors hold less than 2% in the company, making the stock vulnerable to volatile movements. Promoters had pledged part of their stake in the company. Market watchers said the regulators and exchanges should have put curbs on the scrip earlier as retail investors would also get trapped in the ongoing speculative drama.

While downgrading the company, Crisil said, ?The downgrade reflects stress in Akruti?s liquidity, and extended delays in its project completion.

The company?s liquidity has been adversely impacted by the overall slowdown in the sector, coupled with its aggressive development strategy and increased focus on commercial projects.?

?The liquidity stress is reflected in the delays in the payment of certain working capital loan instalments by the company, and in the rescheduling of a few of its bank loans. The liquidity problem has been accentuated by the company?s increasing concentration on commercial projects, which need a greater proportion of upfront funding than residential projects: the share of commercial projects in the company?s total saleable area in ongoing projects is 69%,? it said.

Crisil said the current slowdown in real estate demand has also impacted Akruti?s sales. There have also been extended delays in approvals for new slum rehabilitation scheme projects in the past three years. In order to address the liquidity concerns, the company is planning a slew of affordable housing projects in Thane and Pune.

Meanwhile, the NSE said on Thursday it has barred trades in Akruti City from March 20 in the futures & options segment as its derivatives contracts had crossed 95% of marketwide position limit. NSE said trade in derivatives contract could be done only to decrease positions and any increase in open positions would attract disciplinary action.